Three Big Benefits of Starting a Nonprofit

The world needs more charitable people than ever before. Founding a nonprofit organization can be an amazing experience for go-getters looking to make an impact on the world around them. Building a nonprofit from the ground up can be a formidable task, though. It requires a deep commitment to the vision of the organization as well as a distinct skill set. Even so, most entrepreneurs have the tools necessary to succeed at running a nonprofit whether they're aware of it or not. Here are a few of the strongest advantages to starting a nonprofit.

1. It's Similar to Managing a For-Profit Company

The nuts and bolts of running a charitable organization are broadly the same as they are for running a business for profit. This is good news for people intending to make a segue from business to the world of philanthropy. The most vital concern here, as it is in the business world, is to make sure that you have your financial house in order. Given the narrow budget margins that many nonprofits have to work with, it's necessary to keep close track of money coming in and out. Make sure that you have an accurate general ledger including a nonprofit chart of accounts.

Note that all of the benefits being listed here apply to organizations that actually incorporate as a nonprofit company, as opposed to remaining an informal group of do-gooders. Really the only disadvantages to incorporating are the time involved, the paperwork you'll have to fill out and the amount of public scrutiny you'll be under to live up to your ideals. Remember that as a nonprofit, your finances will be completely open to public inspection! Incorporation also has the benefit of shielding directors and trustees from debt incurred by the nonprofit by establishing the company as its own legal entity.

2. The Organization Has a Built-In Vision

This couldn't be more important, and is almost certainly the driving force behind the decision to start the company in the first place. Your organization is about something. In a world where authenticity is often sorely lacking, a nonprofit is objectively the good guy. Poll after poll taken in marketing research has shown that people care deeply about the values of any organization that they give their money to. Be sure to lay this vision out formally as you would in a standard business plan, but make sure that you learn how to market that vision to a jaded public as well.

3. Tax Exemptions and Grant Eligibility

The difference between a nonprofit company and a group of people randomly uniting for a common selfless goal comes down to one simple alphanumeric: 501(c)(3). That's the IRS tax code excusing nonprofits from federal corporate income tax liability. Even better news is that after this exemption is granted, local and state tax breaks typically follow suit. This also ensures that the money that individuals donate to you are tax deductible. The benefits thus get paid forward in multiple ways. Nonprofits can also be the recipients of large charitable donations via bequests, government grants, fees for goods and services or even interest from investments.

Be aware that one tradeoff for all of this is that nonprofits must often have some sort of power-sharing system at the top, usually taking the form of multiple directors organized in the form of a board. This lessens the chance that the person at the top will get greedy and do something grossly illegal, like starting a nonprofit to benefit one specific individual or a family member.

Jumping into the world of charitable giving can be daunting even for an experienced entrepreneur. By keeping these few simple facts in mind, the leap from learning to sharing won't seem quite so massive. If you do this right, your organization is guaranteed to leave behind a positive legacy that will outlive all of us. What could be more rewarding than that?